Valuing Growth

Try saying Profits without “Quotation Marks.”

Valuing Growth

A reader, Arden, asked an intelligent question about how I value growth. Since I am on the road and will not post again until Tuesday, I wanted to post Prof. Greenwald’s Lecture Notes on valuing growth.

Valuing Growth_ManagingRisk

Read through these and post your thoughts.

Have a happy Easter!

3 responses to “Valuing Growth

  1. Hi John,
    Thanks for the growth valuation handout.

    On the Value of Growth – Basic Forces at Work page, what if G is more than R and is G the growth rate of earnings? There’s mention of growth rate of industry so I got confused.

    I’ve seen it mentioned elsewhere that the WACC is kinda theoretical and therefore is less useful in practice. With interest rates so low, is the practical rate 6% (as mentioned in the first couple of lectures?).
    How does one determine the true cost of funds?

    I don’t get the page Valuing Growth – How much does it add
    Could you please elaborate? I understand that bottom right of the table is growth that adds a lot to value, but how do I use it? Then how does the 16PE to 48PE relate to the discussion on the page?

    Finally, on the next page, “Procedure in Practice”, the “identify organic growth” has (GDP+-). You mean see how much above the gdp is the actual company’s growth rate which implies “internal” growth vs growth due to overall economic growth?

    An applied example on a case would be really helpful.

    • Good questions, but I may not get to answer it until this weekend. Hang tight.

      I think we need a whole section on valuing growth–part of valuation after competitive analysis.

  2. Mohammed Al-Alwan

    Hi john ,i have a couple of question on franchise investing!!!

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